One of the main purposes of a prenuptial agreement is to limit the potential claims on the wealth or assets of one of the parties to the marriage and avoid costly litigation. In order to give your pre-nup the best chance of success it is important that :
- a prenuptial agreement (pre-nup) must be drawn up by a qualified solicitor
- both you and your partner get independent legal advice to avoid any claim of conflict of interest the agreement cannot be considered profoundly unjust
- full financial disclosure of both parties has been made
- parties have had time to review before signing
- both parties must voluntarily agree and solicitors to confirm the agreement was entered freely and knowingly – no pressure, undue influence or duress to sign the document
- the agreement has been drawn up as a deed and executed at least 28 days before your marriage
- the contents are fair and reasonable, and not out of date
- respect for individual autonomy is considered
- a review is preferably held after a period of time i.e. after 5 years
A prenuptial agreement can help you avoid a 50/50 split of the assets you have bought into the marriage if you end up applying for a divorce. If parties cannot agree how their assets should be split and there is no pre-nup in place, then it will be down to the Court to decide, which is costly and sometimes very protracted. This is notwithstanding when a Judge decides what is fair and reasonable, the assets accumulated before marriage are likely to be taken into consideration.
An agreement is more likely to be upheld by the court if each party has all the information that is material to his or her decision and intends that the agreement should govern the financial consequences of the marriage coming to an end. A pre-nup agreement deals with the following :
- How property, finances, assets, gifted assets, pensions, business and money acquired before and during the marriage, and after the marriage ends, as well as inheritance or future inheritance can be protected
- Where one party has substantially more capital than the other
- Assets in other jurisdictions
- Income, such as treatment of earnings and future earnings and interests under trusts
- Bank accounts – parties should maintain separate personal and business bank accounts to clearly demonstrate distinctive incomings and outgoings
- Protect parties with a ‘debt clause’ from being liable for the other spouse’s (any) outstanding debt – declare that the debts would be repayable from any assets or property assigned to your partner in the agreement and not from your assets.
- Shares and all other assets of value (more than £500.00)
- Assets which are owned jointly; which are owned solely and by whom
- Certain assets which are preserved for children from a previous relationship and their inheritance rights are protected
- Peace of mind and retention of control of each party’s own business or investments
- Maintenance or spousal support – whether one party will pay maintenance and if so how much and for how long? There will be an expectation to provide for the spouse if it is a long marriage and if the other party has been accustomed to a certain lifestyle
- The Parties might want to consider outlining their financial responsibilities for housing and living expenses prior to moving in together after getting married to show who contributed what or more in the marriage
- Parties to outline any significant amount of debt they are bringing into the marriage
- The necessity to consider having a will drawn up in the event of your death as your partner will legally inherit all your assets and property under English law unless there are provisions stipulated under a will stating otherwise
However, a pre-nup will not be upheld if this would prejudice the reasonable requirements of any child of the family – the best interests of the children are predominant. It will also be unfair to hold parties to their agreement where the needs of one of the parties have changed or would not be met by doing so. The court may change or alter the agreement if it has not incorporated any foreseeable changes in the future, or even void or partially void an unfair agreement. The main and most important clause is that the agreement must also be fair – to enable the parties and children to meet their needs. If the agreement does not facilitate this (needs) provision following a divorce, the court is highly unlikely to uphold the agreement, even if all of the other formalities have been met.
A prenuptial agreement or postnuptial agreement is not legally binding upon English courts, but where it is executed in accordance with the current case law then it is highly persuasive and will generally be upheld in the event of a dispute with respect to financial settlement in a divorce case. Since the landmark decision in Radmacher v Granatino in 2010, more weight has been given to pre-nup agreements and are more likely to be upheld, unless they are unfair at the time the parties get a divorce.
However, this will only be where, for an example, there are not significant changes of circumstances or interests of children which have not been appropriately taken into account. Also, any agreement should be in accordance with the current family law. As such it is important full information is provided and that the agreement is reviewed where necessary either after an appropriate period of time or following a significant change of circumstance.
Cohabitation agreements work in the same way as prenuptial agreements, but tailored for those who are not getting married.